BILL ANALYSIS �
SB 1251
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SENATE THIRD READING
SB 1251 (Huff)
As Amended June 18, 2014
Majority vote
SENATE VOTE :36-0
PUBLIC EMPLOYEES 7-0 APPROPRIATIONS 17-0
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|Ayes:|Bonta, Allen, Harkey, |Ayes:|Gatto, Bigelow, |
| |Jones-Sawyer, Rendon, | |Bocanegra, Bradford, Ian |
| |Ridley-Thomas, Wieckowski | |Calderon, Campos, |
| | | |Donnelly, Eggman, Gomez, |
| | | |Holden, Jones, Linder, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires a joint powers authority (JPA), formed on or
after January 1, 2013, to provide specified employees the
retirement benefit that was available to employees of the
employer on December 13, 2012, rather than the benefit required
under the California Public Employees' Pension Reform Act of
2013 (PEPRA). Specifically, this bill :
1)Requires a JPA formed after January 1, 2013, to offer the
retirement formula that was available on December 31, 2012,
from the public employer(s) establishing the JPA to any
employee that is not a new member and is employed by the JPA
without a break in service of more than 180 days.
2)Specifies that, if more than one employer forms the JPA, and,
therefore more than one retirement plan was in place for those
employers on December 31, 2012, the JPA is required to
indicate which defined benefit plan or formula applies to
employees who meet the above conditions.
3)Prohibits the formation of a JPA on or after January 1, 2013,
in a manner that would exempt a new member from the
requirements of PEPRA. New members may only participate in a
plan that conforms to the requirements of PEPRA.
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EXISTING LAW :
1)Authorizes, under the Joint Exercise of Powers Act, public
agencies to enter into agreements to jointly exercise any
power common to the contracting parties, including providing
for the creation of an agency or entity that is separate from
the parties to the agreement and is responsible for the
administration of the agreement.
2)Allows local public employers forming a JPA to contract with
the California Public Employees' Retirement System (CalPERS),
the California State Teachers' Retirement System, or one of
the 1937 Act county retirement systems to offer retirement
benefits to their employees if the JPA meets the federal
definition of a governmental plan. The JPA is then a new
contracting employer in the retirement system.
3)Allows public employees who move between public
employers-usually within a 180-day timeframe-limited special
privileges under laws (such as when the move is between two
employers in the same retirement system) or reciprocity
agreements between retirement systems (such as when the change
in employment occurs between employers in different retirement
systems), as specified.
4)Establishes, under PEPRA, a new retirement plan formula and
requires public employers to offer the PEPRA formula to new
employees first hired into public service after January 1,
2013, as defined.
5)Requires legacy employees (i.e., employees who are not subject
to PEPRA) who were first hired into public service prior to
January 1, 2013, and who move between public employers within
a 180-day time period, to be grandfathered and eligible to
receive the benefit plans offered to employees of the public
employer on December 31, 2012.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)One-time special fund costs to CalPERS of approximately
$200,000 for implementation and systems changes.
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2)Increased pension benefits payable as a result of more
generous benefits for certain members under pre-PEPRA formulas
compared with current post-PEPRA benefit formulas.
COMMENTS : According to the sponsors, the Cities of Brea and
Fullerton are attempting to create a JPA for joint fire
services, and existing personnel from both cities would be
transferred into the JPA. However, the passage of PEPRA
introduced a new and unintended challenge into the feasibility
of JPA formation.
The Brea and Fullerton JPA would be a newly formed public
agency. With the adoption of PEPRA in 2012, all new public
agencies formed after January 1, 2013, would be required to use
the new pension formulas outlined in the law. Because the new
pension formulas are reduced, the cities of Brea and Fullerton
would not be able to move their current employees over without a
loss of benefits-even though there would be no lapse in their
public service or change in their duties and responsibilities.
Consequently, this would prevent the two agencies from taking
advantage of the cost and operational efficiencies a JPA would
offer. Without the ability to transfer current city employees
to the JPA, this good governance effort to consolidate services
may become unworkable.
The sponsors conclude, "Brea and Fullerton recognize that the
most efficient and effective model for the long term success of
consolidating the two fire districts is the formation of a JPA
which would become the employer of the consolidated staff, to
provide the ongoing functions of joint Fire Command Operations,
and finally to set up the structure to allow for the
consolidation of fire service functions of the two cities.
"Clearly the most expeditious path to successful formation of
this innovative approach to achieving efficiency in local
government is one that avoids or minimizes employee concerns
about detrimental impacts to their retirement security."
There is no registered opposition to this bill.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957 FN:
0004730
SB 1251
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